THE CHICKEN AND THE EGG (A Tale of Bills and Consultations)

January 2016.

It used to be the practice that, when legislative changes were pending, a Bill went to
Parliament, which debated and (usually) passed it, following which Whitehall went
about drafting the regulations which would follow it, again for consideration, and
approval, by Parliament. In the case of the proposed reforms to the rating system,
however, things seem to be happening in a different order: at the time of writing this
piece, however (early January) the Enterprise Bill (which has had a couple of rating
clauses inserted into it, has yet to pass from the first house to the second; but already
the consultation on the proposed regulations has just closed; so there are those who
believe that the regulations themselves are already substantially drafted.

These proposed changes are controversial, and apparently not understood by many
professionals. VOA staff cannot express views in public, one way or another, of
course; private practice valuers have mixed views about different parts of the package
(though generally hostile to the proposals as they stand), and billing authorities are
unsure about the potential outcome, for them - or, indeed, what outcome they hope to
see . All of that being so, what I am going to do is to set out, in summary form, what
I believe to be the views of various “camps”, before adding a few thoughts of my
own. I stress that I am drawing for this piece, on published speeches and
correspondence, other than when I set out my own views, which I flatter myself are
informed - at least to some extent!

The Government’s Proposals

Recognising that some measure of reform was required, proposals for change were
put forward in 2014, but these met with such a degree of general disapproval that
they were withdrawn, and replaced, last year, with the present proposals for reform of
the appeal system, which have become known as “Check, Challenge, Appeal”. These
proposals have been the subject of a consultation which has just closed, while,
simultaneously, a Bill has started its passage through Parliament. This Bill, the
Enterprise Bill, at present awaits its Third Reading in the House of Lords, from which
it has to pass to the Commons. This Bill, the Enterprise Bill, is mainly directed at
improving opportunities for business and widening opportunities for apprenticeships;
but clauses have been added to it, principally to provide for the widening of the
Commissioners of Revenue and Customs Act 2005, to permit what is said to be a
wider sharing of information given to a Valuation Officer for rating purposes, than
the 2005 Act is said to permit.

The new system contemplates a three-stage process. The Government’s assertion, as
it appears from the Bill, is that information received by the Valuation Office Agency
for rating purposes is to be treated as confidential taxpayer information, in the same
way as information provided for capital taxation purposes, just as information given
to an Inspector of Taxes, has for many years been treated as confidential - to the
extent, I believe, that a taxpayer’s file remains closed from inspection by third parties
until a century after that taxpayer’s death. The applicability of this principle to rating
information is challenged, as is the assertion, going back to a VOA Circular of 2010,
that the 2005 Act prevents disclosure.

The objective is to reduce the numbers of appeals against assessment; and the idea
to bring this about is that ratepayers should not start by putting in proposals against
their assessments, but should follow two new stages before an appeal is made.

The “Check” stage, is the first of these stages; and is intended to allow ratepayers to
see how an assessment has been arrived at (presumably by examining the VOA
website) by assuring themselves that the factual information held by VOA is correct.
Data shared by VOA with the ratepayer will include “…fuller detail about the
valuation, including the rents for that property. The valuation may be amended in
the light of any updated factual information”. This, it is said, will resolve some cases
and this particular stage will not take long to complete.

The second stage is that of the “Challenge”, in which the ratepayer is to set out full
details of its case and to provide full details of is valuation. This is the point, we are
told, at which the VOA will “… share relevant property information collected from
third parties (such as full rental details, receipts and expenditure and construction
costs) that has informed the valuation”. The Government takes the view that
“…..under the present system, ratepayers and their agents often do not provide case
details until the case has been listed for a hearing….. far later in the process”. This
earlier exchange of information of property market information under he new system
(the spokesman continues) means that the Challenge stage “… can proceed quickly
and ratepayers can make well-informed decisions on how to proceed.” the Minister,
Baroness Neville-Rolfe denies that additional burdens will be places upon businesses,
explaining that: “…while [their] proposals mean that businesses should provide full
information at an earlier stage, in most cases they will not need to provide more
information, in total”.

As to the status of rating information in VOA hands, the Minister says: “ We are
confident that the officers of the Valuation Office Agency are required by the
Commissioners of Revenue and Customs Act 2005 to treat information provided as
confidential except where the law specifically provides for information to be shared.
The Act (sic) also provides for the Valuation Office Agency to share information
where it is for the purposes of the Valuation Office as valuation officers are within
the ambit of HMRC”.

Opposition in Parliament

The best place to look for what was said is, of course, Hansard for 25th November,
from about 8pm, when the House considered Amendment 64. The well-briefed,
cross-bench Earl of Lytton (himself an ex-VO rating surveyor and an honorary
member of the Institute) moved the amendment and made a number of comments in
relation to several matters outside the strict scope of this article, but relevant to it, to
which replies were furnished in Lady Neville-Rolfe’s response (she is a Department
for Culture Media and Sport minister) to his subsequent letter. That response is in the
Library of the House.

Followers of this debate would do well to read the Hansard speeches, including
those by Lord Mendelsohn and Lord Stoneham, and the Minister’s letter. Between
them. they go a long way towards setting out the proposals and the objections thereto.

This amendment was called on, fairly late in the evening, by which time many peers
had left the Palace of Westminster. Because of the very low numbers present, Lord
Lytton felt it inappropriate to divide the House; but the questions raised in that debate
cannot be regarded as answered and settled. I will return to what I regard as the
“elephant in the room”, in my personal comments

Objections to the Consultation Proposals

Although in her letter the Minister refers to “the Act”, the Enterprise Bill is just that -
a Bill, even though a consultation on regulations would normally follow enactment.
Nevertheless there has been a consultation process in relation to, essentially, the
“Check, Challenge, Appeal” procedure, which Whitehall seems to assume is safely
enshrined, already, as a statutory instrument. It has drawn heavy criticism from many
sides, and on differing bases according to the complainants’ standpoints.

The most frequent complaints have been about the length of time which the
ratepayers say will be needed to complete the first two stages (as opposed to what the
Minister tells us), and the wide endorsement of Professor Zellick’s call for wider and
much earlier sharing of information between Agency and agents, in order to reduce
the numbers of appeals. Some argue that a return to full disclosure at the outset
would go a long way towards the reduction in appeal numbers, while others blame
the current and continuing logjams on government action in limiting the backdating
of appeal effective dates, generating a wave of appeals, on the increasing
encroachment of the Treasury into an area which was traditionally one for local
government, on the growing bureaucracy around appeals in he Valuation Tribunal for
England and the extended underfunding of the Agency.

Space simply does not permit a review of all of the objections to the proposals - they
are legion and varied. Some want to see greater billing authority involvement, while
others do not. Some want penalties for ratepayers at differing scales for providing
incorrect and misleading information to the Agency. The standard of many of the
representations submitted, has been balanced, and high.

Everyone agrees that reform is necessary - the main debate has been about the extent
and nature of those reforms.

My Two penn’orth

For all of the discussion, few have mentioned the elephant in the room, which I will
now do. I believe that this whole parliamentary and consultation procedure begs the
question of the 2005 Act operating to limit the power of the Agenc to disclose
information given to it in connection with its activities under s41 Local Government
Act 1988, to ratepayers. My belief, shared by Sir David Holgate in his Opinion for
the Rating Surveyors’ Association (of which the Department has a copy) and by
others, is that that Act does not operate in that way. There is no suggestion, of which
I am aware, that information given to or used by the Agency in compulsory purchase
and compensation cases, is to be treated as confidential - compensation is not an
HMRC function, and nor is rating.

The Department has been asked to supply supporting evidence for its expressed view:
it has declined to do so; and the question cannot therefore be said to be settled.
Indeed, had it been so settled, in 2005, I cannot believe that it took VOA until 2010 to
proclaim that its powers were so limited, if indeed, as a matter of law, they were so
limited. To assert otherwise would be to accuse the Agency of considerable
inefficiency. There would therefore seem to be other reasons behind this argument,
which have not been made clear.

When rating valuation was removed from the control of local government in the late
1940s rating valuers who transferred from local government to he Inland Revenue
Valuation Office worked in parallel with the District Valuer service, created to deal
with Estate Duty prior to the First World War. The head of a local office was styled
the District Valuer and Valuation Officer, a style which lasted until agency status
came along and, like the waters of equity, the two tasks flowed in the same channel
but did not mix. The Board of Inland Revenue appointed a DV/VO and, for taxation
purposes, the office reported to the Board; but the client department for rating was
what has become DCLG.

Information given to the Valuation Office for capital taxation purposes was regarded
as confidential and was to be treated as such, in the same way as information given to
an Inspector of Taxes. This issue of confidentiality was debated at the highest level
in the Valuation Office and a guidance note was issued, in (I believe) the nearly
1980’s, in the Chapter Instructions over the signature of Walter Williams CB FRICS
and also, perhaps, that of Norman Behr FRICS (the two Deputy Chief Valuers at he
time) that information received by the Office on a Particulars Delivered form could
be used in negotiation “over the desk” but could not be used in rating valuation
proceedings, unless the capital transaction was disclosed, separately, on a Form of
Return for rating purposes. This is the only restriction of which I, and others who
worked within the Valuation Office at the time, am aware, and no doubt the VO
Circular is available and discoverable in VOA records.

It follows, therefore, that, in my personal capacity, I have difficulty in accepting the
assumption which the Department invites us to make, without producing any
evidence or argument that the scope and extent of the Act of 2005 is as it claims. I
share the views of Sir David Holgate, who reviewed the history, with his customary
degree of care. As always, I am open to correction; but if I am right in this, then this
consultation, with all due respect, is fundamentally misconceived, being based on a
false premise. Perhaps the easiest way to deal with this would be for the Minister to
publish the advice which makes the Government so “confident” of its stance.